Tuesday, June 05, 2007

New Illusion.

The rise of the new political party New Alliance in Denmark is a textbook example of how politics today is more about presentation and style than substance, and how the socialist and left wing is increasingly being marginalised.

New Alliance was founded by three prominent politicians from the center and right of Danish politics 4 weeks ago. They have made only two policy announcements: 1) a flat income tax at 40% for all, and 2) the party will only support a conservative/right wing government.

The tax proposal would increase income tax for the majority of taxpayers as it would eliminate all deductions and exemptions.(1) While the top income earners would pay less tax under a flat tax scheme, those with lowest the income, i.e. those on welfare and state pensions, would have their tax increase with 100%.(2).

Yet in spite of such radical liberal tax policies and lack of any other political thought, the party already has 19.000 members(3) and is polling at 10-12 %(4). This would make New Alliance the fourth biggest party in Denmark and put it into a position of influence. The really astonishing thing is, however, that party is mainly attracting voters from the left, i.e. the Social Democrats and Social-Liberals!

Denmark is therefore heading towards a situation similar to the US and UK where the political spectrum does not contain a left.

1) New Alliance haven't really been specific about their proposal but I'm assuming its a flat tax they are talking about, as the base tax rate is presently 38-39 % with incremental increases and with extensive personal exemptions and deductions.
2) Based on an income of 100.000 kr. and no deductions other than the personal exemption (personfradrag).
3) According to the party website: www.nyalliance.dk.
4) see: Danmarks Radio.


At 06 June, 2007 20:54, Anonymous Kiersten said...

Good to have you back!!! Speaking of taxes, I was just curious if you had heard of The Fair Tax. It basically does away with all taxes on income and instead taxes only purchases and some services. We are fed up with our tax code over here also, and in some ways it sounds like a better option than a flat tax (which I'm not crazy about). However, I haven't read into it that much, and I also must admit that change scares me, especially when it comes to the government and our money.

At 06 June, 2007 23:18, Blogger Torsten Pedersen said...

Hi Kiersten. No i haven't heard of FairTax before, but I've heard of similar proposals. There has long been a strong argument by economist and tax experts for the need to replace income tax with other types of taxation. The argument, as I understand it, is that it is unproductive to tax earned income instead of unearned incomes such as capital income and property. The ever increasing globalized economy is also making the administration and control of income tax more difficult.

I am not yet convinced that income tax should be replaced as the main source of public funding, nor that there shouldn't be progressive taxes. I'm also not certain that a tax such as FairTax woulden't be harder on those with the lowest incomes. I am, however, open for suggestions and I know that the US tax code is particularly difficult.

As a US citizen I am obliged to file a US tax return each year. US citizens are taxed on their world wide income wherever they live in the world (although foreign tax credits and foreign earned income exemptions usually ensure that US citizens living abroad with foreign incomes won't pay any taxes to the US). I have also become aquatinted with US tax as volunteer tax advisor at the US embassy in Copenhagen for a number of years.

The US tax code suffers, like most tax codes, from being the result of numerous political compromises and changes complicating the concept of income and deductions, exemptions and tax credits. So as long as there is politics, then I'm afraid we're bound to live with complicated tax regimes.

At 07 June, 2007 00:51, Anonymous Kiersten said...

Thankfully our taxes aren't that difficult and my brother is an accountant so we don't have to mess with it. Yay!!!! My understanding with this proposal is that it does make some provision for lower income families. My fear is basically what you said, that the politicians would find some way of making it difficult. It just can't be as simple as it sounds. I found out the other day that we are still paying a phone tax that they created to pay for the Spanish/American war. Somehow you'd think that it would have been payed for long ago but....you never know I guess. :-)

At 07 June, 2007 08:28, Blogger Lasse Bech said...

They will support a right wing government?

Their main concern seems to be to eliminate the influense of the Danish Peoples Party.

At 07 June, 2007 10:44, Blogger Torsten Pedersen said...

Phone tax? Now there's a new concept for me... Still paying for the Spanish-American war? At least Britain finally paid back all its loans from the Second World to the US war last year!

Lasse, I accept that Ny Alliance primarily wants to isolate DF (which is a move I can only applaud). However, they have also made several hostile statements towards the left, including using the derogative 'red cabinet' to describe the opposition parties. These statements, together an extremely liberal tax plan, seems to indicate a clear right wing agenda for Ny Alliance.

I should perhaps be willing to wait for Ny Alliance to actually formulate their policies, but I most admit to being skeptical about a party created prior to having any policies.

At 08 June, 2007 09:45, Blogger karlund said...

The taxation of purchases is possibly even worse than income tax, because it has a tendency to be very harsh on the poor - there simply are certain things you need, you can't live without buying stuff.
The principle of a single tax (as proposed by Henry George and John Locke http://members.aol.com/_ht_a/tma68/geolib.htm)
is a much fairer principle for taxation. It doesn't tax your labour at all, but you gains made due to land value increase - the wealth created by the common, not the individual. Additionally instead of creating inflation (other taxes do) it decreases the inflation rate.

Sorry for my Geogisme out-cry, but it is a rare privilege to write about that side of me ;-)

At 11 June, 2007 16:24, Blogger Lasse Bech said...

Torsten you are probably right. See this:


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